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The companies did not say what the new company would be called or who would be its chief executive, but did say the new CEO would be selected from outside the two companies. The merged firm will be headquartered in Stockholm and will have its primary listing on the Stockholm exchange, with secondary listings in Helsinki and the US.
In a statement released on Tuesday evening, the companies said that their combined mobile subscriber base would be more than 8 million people, and that they will have an ownership interest in companies with an additional 14.6 million mobile users. The combined firm will also have 7.6 million fixed-line customers in the Nordic and Baltic regions.
Under the all-share deal, Telia will offer 1.514 of its shares for each Sonera share, a premium of 15.8 percent to Sonera's closing price of EUR5.70 last Friday. This gives Telia shareholders 64 percent of the new company, while Sonera's shareholders will own 36 percent.
The deal comes as Sonera has begun to emerge from a traumatic nine-month period, plagued with mounting debts due mainly to its hefty outlay on 3G mobile licences. Sonera has been executing a restructuring program that has seen it cut back sharply on its 3G investments, slash hundreds of jobs, and sell off non-core assets, including its 10 percent stake in the Irish directory enquiries company Conduit.
The merger marks the first time that former incumbent telcos from different European countries have combined, and follows Telia's failed merger with Telenor of Norway in 1999, which collapsed in a fury of nationalistic bickering. Negotiations for the merger between Telia and Sonera have reportedly been conducted on and off for more than a year.
Currently both Telia and Sonera are still majority owned by their respective governments, with Sweden holding nearly 71 percent of Telia, and Finland owning 53 percent of Sonera. But the governments said they would reduce their shareholdings during the five years after the deal has closed.
The companies said they hope to achieve synergies of EUR300 million a year by 2005, but the combination will also bring one-time costs (excluding transaction costs) of around EUR240 million.
Analysts said the next move for the merged company might be to seek a link-up with other Nordic players, possibly Denmark's national carrier, TDC. Lars-Eric Petersson, Chairman of Telia, said on Tuesday that the merger constitutes "the first major step in the Nordic consolidation within the industry."
Petersson is to become deputy chairman of the new company, with Sonera's Chairman Tapio Hintikka as the new chairman of the board.
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